by John Darer® CLU ChFC MSSC CeFT RSP CLTC
This appeared on the website of a settlement planning industry veteran** in answer to the question “What are Structured Settlements?” at the time of posting:
“Instead of taking the entire settlement or judgment in cash, you have the option to “structure” all or a portion of your recovery in order to generate future payments designed to coordinate with your future needs.
The original defendant will generally “assign” his/her obligation to make the future payments to a major life insurance company (such as New York Life, MetLife, John Hancock, MassMutual, etc) and the payments are then paid to you by the life insurance company in the form of an annuity”.
Comments:
- The Assignor’s possessive pronoun could be his/her OR its obligation. Kindly review the Structured Settlement Flow Chart below, which details the steps and sequence involved in a structured settlement transaction.
2. Meligan is incorrect for the blanket statement that the (qualified) “assignment” is to a life insurance company. Only one of the current qualified assignment companies in the structured settlement industry (New York Life Insurance and Annuity Corporation, which is used for New York Life Insurance Company funded structured settlements) is a life insurance company.
3. Even so, that company is not the company that issues the structured settlement annuity. Meligan implies incorrectly that the “life insurance company” does two things (1) accepting the “assignment of liability to make future periodic payments and THEN (2), funds the obligation pays the plaintiff in the form of a structured settlement annuity that the assignment company buys to fund its assumed obligation.
4. Following the above chart (assuming the obligation to make periodic payments under the structured settlement is funded with an annuity): At Step 2, New York Life Insurance and Annuity Corporation, the assignment company for New York Life Insurance Company funded structured settlements, takes on the obligation to pay the Plaintiff from the Defendant, its insurer or a QSF and then, at Step 3, it purchases an annuity from New York Life Insurance Company to fund its obligation. Then, at step 4, It directs the annuity issuer to pay the plaintiff directly or, if applicable, to the plaintiff’s trust.
5. Structured settlements may also be funded by obligations of the United States government. In such cases the qualified assignment company will not be a life insurance company, See IRC 130(d) 26 U.S. Code § 130 – Certain personal injury liability assignments | U.S. Code | US Law | LII / Legal Information Institute
6. While Massachusetts Mutual Life Insurance Company (“MassMutual”) is a life insurance company, it is no longer writing structured settlements.
Structured Settlements 101. It’s not rocket science!
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